BUSINESS COUNCIL of MONGOLIA NewsWire

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Issue 165, April 29 2011

NEWS HIGHLIGHTS: Business:

MCS merges its ITC sector companies to form Unitel Group;

EBRD lends USD40 million to Magnai Trade;

Prophecy submits formal request to build Chandgana power plant;

Savings Bank appoints ING Bank as exclusive financial advisor;

Arbitration court begins hearing Khan Resources case;

Power plant to be built under Concession Law at Mogoin Gol mine;

Xanadu Mines submits positive Q-1 Report;

Rio Tinto renegotiates deal, settles with Guinea;

PetroChina Daqing Tamsag to pay 5% royalty;

King Solomon Mines hits near-surface gold and silver;

Mongolia Growth Group appoints B. Losolsuren to Board;

Metal-Tech finals delayed to June following uncertainty in Mongolia;

Bucyrus 1Q earnings jump 61 percent.

Economy: Central Bank raises policy rate by 0.5%;

All Tavan Tolgoi bidders ready to invest in railway project, says Minister;

Deputy Minister pins hopes on successful bond sale;

Agreement signed to guarantee Development Bank bonds;

MP wonders how Erdenes MGL paid MNT25 billion to the Human Development Fund;

Most MPs favor President’s proposal to give students MNT700,000 a year;

Standing Committee sees NDIC as being too innovative;

Foundation stone of railway project laid;

Draft law seeks to improve tender selection process;

Apartment prices likely to stay high;

Contracts allowed export of crude without tax;

Chinese in full control of cashmere trade;

Minerals the new weapon in Mongolia's latest bid to conquer world;

Mongolians realizing goals need time to be met;

Lots of interest in helping Mongolians find what they have got;

Rising food prices threat to economic growth, ADB warns;

Fresh funds for China’s sovereign wealth fund;

Inflation in China poses big threat to global trade;

Singapore aims to be renminbi hub.

Politics: MPs tell People’s Assembly leaders their demands not acceptable;

People’s Assembly wants “criminal” Government to go;

Bayar tops People’s Assembly list of oligarchs;

Irony in Enkhbayar’s challenge to oligarchy;

President wants interest in mining and politics to be kept apart;

MP asks Prime Minister to explain inaction on Parliament protocol;

MP hopes parties will recognize need for administrative reform;

Every household, company to have post box by 2020;

TV official regrets lack of intellectual property rights;

Asia Foundation to help in environment protection;

Program planned to assess effect of mining on health;

MPP team visits North Korea;

Mongolia to host international peace festival;

Mongolia’s rail choice seen as breaking China's grip;

Nearly 10,000 positions vacant in mining;

Australia seeks workers to meet boom.

*Click on titles above to link to articles.

BCM MONTHLY MEETING RECAP

The meeting on April 25, with Mr. Laurenz Melchers in the chair, was attended by 83 members. Membership now stands at 176, four of them joining since the last meeting. This is an almost 35% increase year on year. Mr. Jim Dwyer reported that the working groups are working well, with the Education WG now going beyond vocational training into higher education in general. The first of the evening‘s three presentations was by Mr. Ch.Otgochuluu, a former Advisor of the President and currently Director, Economic Policy and Competitiveness Research Center (―EPCRC‖). The organization uses internationally accepted methodology to evaluate the sustainable competitiveness of the private sector, and conducts locally-based, high-quality research in matters pertaining to finance, trade and infrastructure policy that directly affect Mongolia‘s ability to compete in a global economy. It has produced a report titled Mongolia in World Competitiveness 2010, where Mongolia‘s economic and social competitiveness has been assessed across the areas of business efficiency, government efficiency, infrastructure and the macroeconomic environment. The comparison had to be restricted to a small number of countries because of lack of resources, mainly funds, but among the 15 chosen, Mongolia was ranked below Bulgaria and above Ukraine. Mr. Otgochuluu spoke at length on an informative and interesting study EPCRC has made of the impact of air service liberalization on the economy. Mr. G. Temuulin, Deputy Director, Erdenes-Tavan Tolgoi gave a thorough update on the Erdenes Tavan Tolgoi Project. Major decisions are being taken one after the other, and now there is the wait for everything to fall in place. Dr. Graeme Hancock, Senior Mining Sector Specialist, The World Bank, spoke on Mining in Mongolia: Challenges and Opportunities. Dr. Hancock is leaving Mongolia soon, and his presentation on Monday was an appropriate valedictory, with sharp clarity and sane logic providing the sugar coating for some bluntly expressed disappointment. Between 2002 and 2010 the share of mining in Mongolia‘s exports and GDP went up three-fold, and its contribution to Government revenue increased 8 times. This breeds complacency, delaying the realization that while ―mining is fine, the bigger challenge is diversification and job creation‖. The deserved hype over Oyu Tolgoi and Tavan Tolgoi has effectively hidden the fact that there has been no ―movement towards development‖ on any other strategic deposit, as also the fact that only 200 or so of the 8,000 mineral occurrences in the country are in operation. Several legal/policy uncertainties refuse to go away, and some political/administrative issues linger. The four new members introduced at the meeting were: 1. JTA International, a health and social sector development consulting firm with 12 years‘ experience operating in Australia and the Asia–Pacific region. JTA offers extensive health and social sector expertise, national and international networks of consultants and tertiary knowledge institutions, and strong, cooperative relationships with partners, and has successfully managed 20 major contracts or sub-contracts with an approximate value of $USD300 million since 2000. 2. Mongol Tax, the first licensed company of the Mongolian Institute of Certified Tax Accountants. It was established in 2004 and its team of accounting professionals and tax consultants helps all kinds of clients, such as international corporations, local companies, individual entrepreneurs, or NGOs, process their accounts, produce timely management accounts, and periodical reports, according to each client‘s individual business objectives. 3. BASF, ―the world‘s leading chemical company‖. With about 109,000 employees, six Verbund sites and close to 386 production sites worldwide, including one in Mongolia, it serves customers and

partners in almost all countries of the world. Its three central divisions, five corporate departments and nine competence centers provide services such as finance, investor relations, communications, human resources, research, engineering and site management. 4. SouthGobi Business Council, founded in December, 2009, to contribute to the sustainable development of the country‘s society and economy. It intends to provide entrepreneurs in its area with market news, support development of their specific business environment, and also of the general economic and business scene in the Gobi zone by strengthening the partnership between entrepreneurs, the state, non-state organizations, and mining companies, both local and international.

BUSINESS MCS MERGES ITS ITC SECTOR COMPANIES TO FORM UNITEL GROUP MCS Holding (MCS) has restructured its Information Technology Communication (ITC) sector companies and set up Unitel Group as its ITC arm. Mr. Enkh-Amgalan is to be its President. The six companies that have merged to form the Group are Unitel, MCSCOM, Monsat, Skynetworks, Skynetcom and Univision. The Group will be a subsidiary of MCS and work as one of the four mobile telephone operators in Mongolia. Unitel is majority owned by MCS. It was established in 2005 as a 50/50 Korean-Mongolian joint venture, and became a fully Mongolian-owned company last November, with MCS owning the majority stake and BSB Telecom the rest. Two months earlier, MCS had bought 22.82% of Unitel from Taihan Electric Wire Co., South Korea's second-largest wire maker, for USD12.8 million. MCS is the largest private group of companies in Mongolia. Established in 1993 as an energy sector consultant, today it has operations in many sectors including mining, energy, infrastructure, IT, communication technology, food and beverage, cashmere and wool apparel production and sales, wholesale and retail sales, and real estate with over 4,500 employees.

Source: Business-Mongolia.com

EBRD LENDS USD40 MILLION TO MAGNAI TRADE The European Bank for Reconstruction and Development (EBRD) is providing a credit of up to USD40 million to Magnai Trade to support the country‘s petroleum sector with investments in energy-efficient technology and to fund the company‘s expansion. The EBRD senior loan will finance the second phase of Magnai Trade‘s development, as well as the construction of 18 new petrol filling stations across Mongolia. It will also help Magnai Trade expand its depot stores network and, thus improve the company‘s distribution system. In addition, new petrol filling stations and depot stores will be fitted with equipment utilizing modern energy efficiency technology. EBRD Managing Director for Energy and Natural Resources Riccardo Puliti said in Ulaanbaatar that the project was part of the EBRD‘s strategy for the sustainable development of the entire petroleum distribution sector in Mongolia. ―Our strategy is to pay particular attention to the promotion of the local private sector and the adoption of best environmental practices. This new project will ensure that Mongolian customers continue receiving high-standard services and better products, especially in the country‘s remote areas and newly-developing regions,‖ Mr. Puliti added. As part of the project, over half of the company‘s staff and their franchisees will benefit from an advanced training course in environmental, health and safety management, conducted by international experts. Magnai Trade is a leading independent private Mongolian importer and distributor of petroleum products and has developed a large fuel wholesale and retail network with a significant market share in the Mongolian market.

Source: EBRD

PROPHECY SUBMITS FORMAL REQUEST TO BUILD CHANDGANA POWER PLANT After 8 months of due diligence, research and study, Prophecy Resource Corp. has submitted to the Ministry of Natural Resources and Energy its formal request to build the Chandgana power plant in Khentii province, central Mongolia. Upon receiving the Ministry's endorsement, Prophecy would proceed to work with the Mongolian Energy Regulatory Authority for grant of a permit and expects to receive it within 6 months. Prophecy engaged Mongolian experts in August 2010 to start work on a Feasibility Study for the mine mouth power plant with a capacity of 600 MW. The necessary technical and financial analysis was completed with assistance from Evonik Industries of Germany. The Environmental Impact

Assessment was approved by the Mongolian Ministry of Nature and the Environment in November 2010. Mr. John Lee, Chairman of Prophecy, states that the company team has ―a solid track record of constructing, operating and financing large energy projects‖, and asserts that the proposed plant ―represents modern industrialization and energy independence for Mongolia, and new potential energy supply to China."

Source: Prophecy Resource Corp.

SAVINGS BANK APPOINTS ING BANK AS EXCLUSIVE FINANCIAL ADVISOR Under an agreement signed earlier this month, ING Bank N.V. will be the exclusive financial advisor of Savings Bank, focusing on its strategic review for potential capital structure initiatives and future opportunities for growth. ING Bank is part of ING Group, a global financial institution of Dutch origin, currently ranked 12th in Fortune Global 500. It is the only foreign bank with a full-service office in Mongolia and has been operating corporate and investment banking businesses in the country since 2008. With its Asia-wide local presence coupled with international reach and global capabilities, ING Bank is in a good position to offer tailor-made corporate finance advisory services to its Mongolian clients and partners. Savings Bank has been adjudged one of the top five banks in Mongolia and has a nation-wide branch network and over 2,000 employees. Cooperation with the ING Bank will significantly strengthen its position in the market and improve its capital source.

Source: Savings Bank

ARBITRATION COURT BEGINS HEARING KHAN RESOURCES CASE The international arbitration court has begun hearing the complaint of Khan Resources Inc. against cancellation of its uranium mining license in Dornod province. The company is seeking USD200 million as compensation from the Government of Mongolia. The Government has named a French arbitrator while Khan Resources has nominated a former Ambassador of Canada to the UN. The identity of the third arbitrator has not been revealed. Hogan Lovells International LLP is representing the Government, while the State Secretary of the Ministry of Justice and Internal Affairs, Mr. G.Bayasgalan, is head of a working group liaising with them. Source: Ardiin Erkh, Udriin Sonin

POWER PLANT TO BE BUILT UNDER CONCESSION LAW AT MOGOIN GOL MINE The Government has approved an agreement under the Concession Law between the State Property Committee and New Asia Mining Group LLC to build a power plant based on coal from the Mogoin Gol mine. Concerned Ministries will now prepare the papers to grant the permission. The Governors of Zavkhan and Khuvsgul provinces have been asked to give land for the power plant, and to raise the capacity of the mine so that the plant has enough coal. According to the agreement New Asia Mining will spend USD110 million to build a plant with capacity to produce 60 mw of power. The plant should be ready in two years and its ownership will vest in the state after 20 years of operation, when the term of the concession agreement ends. New Asia Mining will run the plant in these 20 years and take all the profit. The power generated will be used by people in Zavkhan and Gobi-Altai provinces. Some of them would also get jobs at the plant and acquire experience.

Source: Montsame

XANADU MINES SUBMITS POSITIVE Q-1 REPORT Xanadu Mines has highlighted the following developments in its Quarterly Report for the period ending March 31, 2011: - Positive exploration results at the Galshar thermal coal project with aggregate seam thicknesses of up to 38 meters confirmed. - Three new shallow dipping coal seams identified at Galshar following trenching. - Commencement of Scoping Study at Galshar. - Acquisition of the highly prospective Sharchuluut Uul (formerly known as Mogoin Gol) porphyry copper-gold project. - Formalization of agreements between Xanadu and Noble Group for a strategic coal and iron ore alliance & Joint Venture in Mongolia. - Noble acquiring a 9.9% stake in Xanadu. - Resumption of exploration at Elgen-Zos JV gold project in the south east Gobi.

- Solid progress on coking coal project generation. Exploration drilling started at the Galshar thermal coal project in late February with two diamond drill rigs operating on a double shift basis. It is anticipated that the first phase of the program will be completed by the end of April, and may then be expanded to allow for more detailed JORC Reserve drilling in priority areas. Australia-based consultants have been engaged to construct a detailed and comprehensive coal quality review for the current drill program and results should be available in the second quarter 2011. The name selected for the Xanadu and Noble Joint Venture Company in Mongolia, with each party

holding a 50% interest, is Ekhgoviin Chuluu LLC which translates as ―mother stone of Gobi‟. To date the JV program has targeted areas of significant known coal resources and focused on the green field exploration opportunities identified via information synthesis and geological mapping. A number of advanced projects has been identified that can be fast tracked to development. As on March 31, 2011 there were a total of 170,136,468 ordinary shares and 26,405,000 options on issue. There was AUD21.0 million in cash. Market capitalization on April 21 was AUD103 million. Read more… A Mongolian geological consulting group has commenced their coal resource estimation report which will be used to register the large Khar Tarvaga resource with the Professional Minerals Council branch of the Mineral Resources Authority at the Ministry of Resources and Energy. It is expected the detailed report will be presented at the end of April or early May 2011. Once the resource is registered an application for a 30 year mining license will be applied for with relevant authorities. The Wild Horse Coal Project in Dornogovi Province is at an early stage of exploration. The highly prospective Sharchuluut Uul (formerly known as Mogoin Gol) project was acquired with the purchase of Sodnutag LLC in Mongolia. As a result of this transaction, Xanadu has acquired 100% ownership of this porphyry copper project, one of Mongolia‘s most prospective porphyry copper opportunities. The license for the large Hutag Uul exploration project in Dornogovi Province covers a highly prospective block known to host other porphyry deposits, including the Oyu Tolgoi copper-gold porphyry, the Kharmagtai copper-gold porphyry, and the Tsagaan Suvarga copper-molybdenum porphyry deposits. Geological mapping, detailed geophysics and geochemical rock-chip sampling will continue throughout the Hutag Uul license. A scout drill program was completed at the Hust Uul gold project, focusing on the prospective Zuunbulag Prospect. The results show little encouragement. Source: Xanadu Mines

RIO TINTO RENEGOTIATES DEAL, SETTLES WITH GUINEA Agreement shows how Western companies are increasingly pressured to renegotiate contracts. Rio Tinto has signed an agreement to give the Government of Guinea up to 35% ownership of its Simandou iron-ore project, resolving a dispute that held up more than USD10 billion of investment. Rio Tinto said its Simfer S.A. subsidiary will pay USD700 million to Guinea to secure the right to mine in two sections of the huge Simandou deposit, and aims to make its first shipment of iron ore by the middle of 2015. The settlement shows how Western companies like Rio Tinto are increasingly being pressured to renegotiate contracts with governments in less developed regions like Africa, or risk being shut out of lucrative resources developments. Rapid industrialization in Asia, especially China and India, is tightening the market for iron ore, a key ingredient in making steel. That has handed resource-rich countries an advantage in their dealings with miners as they no longer fear critical investment shifting elsewhere. Guinea, which could export 350 million metric tons of iron ore annually and rank among the world's top exporters of the mineral, said in 2008 that it planned to rescind an agreement with Rio Tinto to develop the entire Simandou deposit because the company had missed deadlines to start mining. Guinea's government split the Simandou concession into four areas, known as blocks. Rio Tinto was left with roughly half its original concession: Blocks Three and Four. Blocks One and Two went to a unit of Switzerland's BSG Group Cos., which later sold down a majority interest in its project to Brazil's Vale SA. Whereas previously Rio Tinto had agreed to Guinea taking a stake of up to 20% in its concessions, it is now offering the Government an interest of up to 35%. The settlement finalized a tax regime for as long as the mine is operating, including royalties payable at 3.5% free-on-board for all exported iron ore. Read more… Rio also agreed to build a new rail line through Guinea and a port so that iron ore can be loaded on

to ships for export, major engineering obstacles that have stymied past efforts by mining companies to develop the deposit. The Government of Guinea has the right to take a stake of up to 51% in the rail track and deep-water port, while other companies will be able to negotiate deals to access the infrastructure for shipping ore from their mines. Resolution of the dispute with Guinea clears hurdles currently preventing Rio Tinto from completing a USD1.35 billion deal to sell down a 44.65% stake in its Simandou asset to Aluminum Corp. of China Ltd., or Chalco. The deal with Chalco, agreed in July last year, will shrink Rio Tinto's stake to 50.35%, with the remaining 5% continuing to be held by International Finance Corp. Source: The Wall Street Journal

PETROCHINA DAQING TAMSANG TO PAY 5% ROYALTY The Mineral Resources and Petroleum Authority has signed a new agreement with PetroChina Daqing Tamsag LLC that will see the Chinese company pay 5% royalty on its output. Talks are also being held on payment of taxes on the 5.3 million barrels of crude that have been drilled since 1998. The company works under an agreement dating from 1993. The company has also been asked to work on environmental rehabilitation of its area of operation.

Source: News.mn

KING SOLOMON MINES HITS NEAR-SURFACE GOLD AND SILVER The ASX-listed King Solomon Mines has hit near surface gold and silver after diamond drilling at its Mud-house Gold Prospect in Mongolia. The drill program will continue for several months with further reverse circulation scout drilling targeting geochemical and geological anomalies discovered 500 meters outside of the diamond drill grid. Reconnaissance exploration at Mud-house in 2010 yielded gold mineralization in soil samples, rotary air blast drilling and reverse circulation drill holes with the recent diamond drill hole aimed at determining the style and extent of mineralization. Source: King Solomon Mines

MONGOLIA GROWTH GROUP APPOINTS B.LOSOLSUREN TO BOARD Mongolia Growth Group has appointed Ms. B Losolsuren to its board of directors. Ms. Losolsuren has extensive experience in Mongolian finance having worked for the Asian Development Bank as an investment officer and as a consultant to the Financial Regulatory Commission (FRC) in Mongolia. She is currently a partner and chief economist at UMC Group, MGG's partner in its recently announced insurance venture.

Source: Mongolia Growth Group

METAL-TECH FINALS DELAYED TO JUNE FOLLOWING UNCERTAINTY IN MONGOLIA Israel-based specialty metals company Metal-Tech Ltd has delayed release of its results for 2010 until June due to complications surrounding its Mongolian joint venture Shim-Technology Co. Ltd. The company warned in January it might have to take substantial write-offs after Erdenet Mining Company, its Mongolian JV partner, initiated bankruptcy proceedings against Shim-Tech. Metal-Tech said it had remained in negotiations with Erdenet and was ―taking all necessary actions in Mongolia to attain a fair and just result for the company‖.

Source: StockMarketWire.com

BUCYRUS 1Q EARNINGS JUMP 61 PERCENT Bucyrus International Inc. has reported that its first-quarter earnings climbed 61 percent as a result of increased demand for a variety of mining equipment in regions such as Australia, Mongolia, North Africa, China, Brazil, India and Canada. Net earnings jumped to USD56.3 million, compared with USD35 million for the same period a year ago. A previously announced deal in which Bucyrus will be acquired by Caterpillar Inc. is expected to close by mid-year, the company said.

Source: The Milwaukee Business Journal

SPONSORS

Khan Bank Eznis Airways

Kempinski Hotel Khan Palace Mongolian National Broadcasting

Mongolian Star Melchers

ECONOMY CENTRAL BANK RAISES POLICY RATE BY 0.5% The Central Bank feels the economy is showing signs of overheating and money supply is increasing too much too fast. Accordingly, it has raised policy rate by 0.5% to 11.5%. Revealing this at a Press conference on Thursday, the Bank officials also said money supply at the end of March was 67% more than in the same period last year. The Bank thinks it will keep rising because of more foreign investment in mining, expansion of the state budget, and banks granting more commercial loans. Inflation at March 31 y-o-y stood at 8.0%. There was a drop in meat price and inflation without food items and consumer goods was 7.9%.

Source: News.mn

ALL TAVAN TOLGOI BIDDERS READY TO INVEST IN RAILWAY PROJECT, SAYS MINISTER Mr. Kh. Battulga, Minister for Road, Transportation, Construction and Urban Development, has revealed that all six shortlisted bidders for Tavan Tolgoi are willing and ready to invest an estimated USD1.5 billion in the proposed project to construct over 1,000 km of new railroads connecting Tavan Tolgoi to Choibalsan via Sainshand. Choibalsan city is already connected to the Russian rail network. The exact total cost of the project will be known when its Feasibility Study is finalized, which is likely in early July. The Standing Committee on the Economy is still working on the cost of laying 1 km of track.

Source: Business-mongolia.com

DEPUTY MINISTER PINS HOPES ON SUCCESSFUL BOND SALE Asked if the Government decision to provide citizens with apartment loans at a flat 6% interest would actually not mean tax payers‘ money being used to settle the difference in interest with banks, Deputy Minister for Finance Ch.Gankhuyag said the idea was to issue bonds to raise the necessary funds. There are several other options, he said and added, ―In any case, the Government can certainly use tax payers‘ money to implement a policy for the nation‘s good.‖ He said the commercial banks were expected to be the principal holders of the bonds that will be sold to raise the funds with which the Development Bank plans to finance large programs and projects, and as such they will be the actual source of the loans, assuring them of an important place in the economy. He expressed the hope that if the bonds do raise MNT100 billion, and the money is properly spent, ―we could resolve both the apartment and the air pollution problems in 10

years at the most. It will be the Government‘s responsibility to prepare the necessary infrastructure for this.‖

Source: Ardiin Erkh

AGREEMENT SIGNED TO GUARANTEE DEVELOPMENT BANK BONDS An agreement was signed on Tuesday between the Chief of the Managing Representative Council of the Development Bank, Mr. Ch.Khashchuluun, and the State Secretary of the Finance Ministry, Mr. D.Battur, under which the Government agrees to guarantee the bonds the Bank is to sell to raise the funds that it will lend to finance large projects and programs. Recently passed laws allow the Government to give such guarantees for public loans worth up to 9.8% of the GDP, said the Minister for Finance, S.Bayartsogt, who said the agreement was a ―milestone on Mongolia‘s path to development‖. Mr. Khashchuluun told media after the event that he expected the Government guarantee to have ―a huge impact‖ on the bond sales. The first issue, for MNT300 billion would be announced at the end of April or early May. He could not be more specific as some paperwork still remained to be completed with the Central Bank and the Mongolian Stock Exchange. Asked about Minister Kh.Battulga‘s statement that the Development Bank will grant funds before April 30 for construction of the new railway, Mr. Khashchuluun said it was premature to talk about granting funds when the feasibility study for the project was not ready and approved. In any case, all funding will be made on the basis of the economic viability of any project and there will be no priority on any other ground.

Source: Ardiin Erkh, Business-mongolia.com

MP WONDERS HOW ERDENES MGL PAID MNT25 BILLION TO THE HUMAN DEVELOPMENT FUND Erdenes MGL has contributed MNT 25 billion to the Human Development Fund whose total needs for distribution of allowances this year is MNT 805 billion. MPs curious to know from where the company got so much money raised the question in Parliament and were told by the Minister of Finance that it was part of the advance payment for Oyu Tolgoi. However, Mr. Z.Enkhbold of DP claims he has information the company took a bank loan with considerable interest to meet its obligations. The Minister has said the Fund has so far received MNT 301.2 billion and MNT 132 billion of the outstanding MNT 504 billion will come before June 30 from dividends on shares, and has expressed his confidence that the Fund will meet its commitments without problem.

Source: Zuunii Medee

MOST MPs FAVOR PRESIDENT‟S PROPOSAL TO GIVE STUDENTS MNT700,000 A YEAR Parliament agreed on Thursday to further discuss a draft law initiated by President Ts.Elbegdorj to give all 140,000 students at all the 111 recognized universities and institutes in the country an annual stipend of MNT700,000. The measure will cost the state MNT130 billion in a year. The money will be paid to students in ten equal monthly installments. MPs U.Enkhtuvshin and R.Bud felt claim to and payment of the stipend should be made conditional on the students‘ grades and general performance. It should not be akin to a budgetary social welfare measure where the recipient has to do nothing to enjoy the benefit, they said.

Source: News.mn

STANDING COMMITTEE SEES NDIC AS BEING TOO INNOVATIVE The Standing Committee on the Economy summoned senior officials of the National Development and Innovation Committee (NDIC) on Tuesday to get first-hand information on its work and told them that the two committees should at all times be seen to be working for the same ends. They were critical of what they saw as the NDIC exceeding its brief. NDIC Chief Ch.Khashchuluun said there should be regular exchange of views so that the legal requirement that a Ministry will set out the policy and the NDIC prepare the plan to realize it can be met. He added that the NDIC has submitted to the Government a draft law identifying parameters of its relations with Ministries. Those who wanted the NDIC not to overstep its limits were led by Mr. B.Batbayar who said so far its only activity has been to request funds. He wanted it to act like the earlier Economic Projects Committee and said the Standing Committee could call for its dissolution if it did not do so. Source: News.mn

FOUNDATION STONE OF RAILWAY PROJECT LAID The ceremonial foundation stone for what will finally become a 1,100-km railway was laid on April

25 at ―Zero point‖ at Khar Toirom, 10 km from Sainshand. Minister for Transport Kh. Battulga and his Deputy, Mr. A. Gansukh, were present at the ceremony along with several other dignitaries. The State-owned Mongolian Railway has won the tender to build 100 km of the total project, from Sainshand to Baruun-Uurt, while Eastern Railway was chosen to build another 100 km from Sainshand to Tavan Tolgoi. Minister Battulga said both companies would be working with their own funds for the time being. Source: The UB Post

DRAFT LAW SEEKS TO IMPROVE TENDER SELECTION PROCESS Mr. N.Ganbyamba, an MPP MP has told media that the present law on tender selection needs amendment as despite prolonged debates little concrete has been achieved to curb the fraudulent activities of some state officials who manipulate most tender selections. More extensive e-governance can stop this, making all facts accessible to the public. All applicant companies should give detailed information on their financial situation. Civil organizations should be responsible for monitoring selection and implementation in a bid to introduce transparency. He also said the amendments he is working on would give more power to local authorities, and Ministries should no longer be involved in deciding tenders for work in provinces. ―It is totally wrong to suggest that local areas do not have the capacity to understand the tender process or to make the right selection,‖ he said, adding, ―If necessary, they will seek the help of professional bodies.‖ Pressed to give an example of bad selection, Mr. Ganbyamba said the Trade Union of Ulaanbaatar Railway has revealed that the company chosen to supply 70,000 tons of fuel charged MNT1,713 per liter when the market rate was MNT1,310. The choice of just one company for this total contract also violated the law regulating monopoly. He claimed several other MPs are enthusiastic about getting tender irregularities covered under the Criminal Law and about stronger penalties on companies for substandard work.

Source: Undesnii Shuudan

APARTMENT PRICES LIKELY TO STAY HIGH Ms. P. Narmandakh, Director of the Construction and Apartment Advisory Center, which provides financial information about new residential projects, says apartment prices have increased by MNT30,000-MNT50,000 per sq. m. in the last year. The cheapest apartments are in Songinokhairkhan district where the average square meter price is MNT800,000-MNT900,000 per sq m, while those in the Khan-Uul district (Zaisan) are probably the most expensive at about MNT3 million per sq. m. The difference is mostly because of the location, and also because bribery rates are higher in areas where the more affluent wish to live. She does not share the general hope that prices will fall as redevelopment projects take off. Demand still overruns supply and the strong recovery by local construction companies has led to some banks offering easier loans to attract more customers. Some construction companies also have started asking for considerably lower down payments. Her advice to apartment buyers is to focus on quality of construction, and not be lured by lower prices. They should also be careful about the legality of the purchase agreement, checking on the development permission itself. A rule of thumb is to make the choice in winter when the quality of the windows is easier to assess. Her center is working on preparing model purchase and leasing contracts.

Source: GOGO.mn

CONTRACTS ALLOWED EXPORT OF CRUDE WITHOUT TAX The State Specialized Inspecting Agency (SSIA) has found that crude oil from Toson-Uul XIX and Buir XXII has so far been exported without payment of any tax as the contracts with the Mineral Resources and Petroleum Authority (MRPA) did not have any provision for levying tax. The agreements were signed in 1993 and 5.4 million barrels of crude has been exported from Toson-Uul XIX alone since 1998 without any tax. Output from both blocs continues to be exported without tax. All these years, audit work had never studied the product sharing agreement and had concentrated on accounts only. The SSIA also feels there was no proper monitoring of how USD4.9 million paid by organizations for training activity has actually been spent. The MRPA has also failed to enforce any environmental rehabilitation work in areas explored and exploited. The SSIA has delivered an urgent note to the Government suggesting a revision of the terms of the original contracts and to see how the loss of tax between 1998 and 2010 can be compensated.

Source: News.mn

CHINESE IN FULL CONTROL OF CASHMERE TRADE After mopping up most of the cashmere in the Eastern provinces, Chinese traders have now moved to the central areas, offering more than MNT70,000 per kg. National cashmere factory owners cannot pay so much from their own resources and wait in vain for Government support. Bonds worth MNT100 billion are supposed to be sold to raise money to be lent to local buyers, but there is little chance that any of this will be in Mongolian hands before all the cashmere, at least the quality stuff, has crossed the border. Even more regrettable is the fact that there is no export tax on cashmere. Trade officials are faced with a bleak future. Raw material sales are fully under the control of Chinese traders, and with a fall in the number of goats, production of cashmere will come down, putting prices even further beyond local access. While Chinese traders have obvious support from their Government and banks, the situation here is just the opposite. The Mongolian Government is a mute spectator, if not a willing conniver in not reimposing the export tax. With less and less stock every year, local production is much below capacity, leading domestic cashmere factories to wonder why the Mongolian State should be seen as weaker than Chinese traders in its territory.

Source: Zuunii Medee

MINERALS THE NEW WEAPON IN MONGOLIA‟S LATEST BID TO CONQUER WORLD Driving into town, the whole of Ulaanbaatar seems like a settlement. It has a temporary feel, until you get downtown and see construction in progress on skyscrapers, and the central Sukhbaatar Square, dominated by a statue of Genghis Khan. The Great Khan is central to Mongolian life. During the 13th and 14th centuries, the Mongols used horsemanship and bowmanship to conquer most of Asia, including the Middle East, and Russia, about 22 per cent of the world‘s total land area, killing 40 million people. Their campaign might even have cooled the planet, marking the first time in history a single culture caused man-made climate change. The Carnegie Institution‘s department of global ecology believes the Mongols may have wiped about 700 million tons of carbon from the atmosphere by killing so many people, as depopulation over such a large area meant that the forests came back to farmland. Genghis Khan‘s name is on everything, from the airport to one of the local beers, and even an Irish pub. He‘s also written into a chunk of the genetic code in the region. Chromosome data published in the last few years show that nearly 8 per cent of the men living in the region carry Y-chromosomes that are nearly identical – that‘s 0.5 per cent of the male population in the world, or roughly 16 million descendants living today. Regardless of their DNA, the young people in Mongolia are fiercely proud of their heritage. Mongolians have a reputation for a muscular form of nationalism, but changing economic realities mean they are looking forward. The Soviet era, too, is fading quickly into the past. The country‘s fabulous reserves of gold and copper mean it is on the brink of transformation from one of the world‘s poorest countries to among the richest. Read more… The resources boom tips over into all areas of life. The bourse in Ulaanbaatar is the world‘s smallest stock exchange, but also the fastest growing. From the top of the mountain you can see the villa developments where those made wealthy by the resources boom will live. Mongolia is the size of western Europe but it has just three million people, giving it one of the world‘s lowest population densities. Mongolians are famously close to nature. There are concerns that the environment could suffer from the sudden arrival of Aussie diggers, British bankers and Canadian geologists. However, the mining sector accounts for 81 per cent of exports, 32 per cent of government revenue and 30 per cent of GDP, and the country‘s resources remain largely untapped. The air can get pretty dirty during the winter, when everyone burns coal, or anything else that comes to hand, to keep warm as the temperature drops to minus 40 degrees. UB, as the hipper locals like to call it, is the coldest capital city in the world. In recent years the extreme cold on the Steppes has seen mass migration of herdsmen seeking refuge in the city – their animals died from the cold so they had no reason to stay on the grasslands. Tetchily poised between China and Russia, Mongolia‘s position as a buffer state between two of the world‘s biggest and most powerful nations has been problematic for hundreds of years, and continues to be so today. Mongolia was a province of China until 1921. Crucial to future development will be how Mongolians get over their traditional dislike of the Chinese. China is set to be the country‘s prime customer for selling resources and Mongolia‘s largest trading partner. There is every sign that the Mongolians are being pragmatic. Locals are getting used to the side-effects of development. There is still horse manure in the streets, but you can see from the Zaisan Memorial how the Toyota Land Cruisers are backing up UB‘s thoroughfares.

Source: The Irish Times

MONGOLIANS REALIZING GOALS NEED TIME TO BE MET As the world waits to hear in May which firms have won the rights to develop Tavan Tolgoi, Mongolia's citizens and international investors are pressuring the government to change its outdated legislation and prepare the country for the boom ahead. The high level of interest in Mongolia's coal reserves and the country as a whole was exemplified by two conferences over the past couple of months. "Coal Mongolia" gathered private and state representatives to discuss the country's rich source of coking and thermal coal for China, while the "Mongolian Economic Forum" opened up Government House to discuss the state's decisions and future role in Mongolia's development. Introducing the latter, Prime Minister S. Batbold outlined the year ahead. "Mongolia's GDP per capita is USD630, under the average of developing countries. We have high goals in front of us. Our focus must be on governance, and government regulations need to be clear," he said. "Our strategies cannot be based on a wish list but on research, and the development must be sustainable and direct to the people. We will eradicate corruption and clearly define the boundaries between state and private sectors. Last year, these issues were like a half-killed snake." Last year's political mantra was "improving the business environment" and gathering interest for international investors to financially support the coming resource boom. Mongolia has quickly become a hot spot for investors looking for high returns in emerging markets. A serious quantifiable error in many concerns was the timing of the government's proposed plans. The recently passed Concession Law listed over 120 public-private partnerships (PPP) to begin the huge infrastructure development needed to support the mining boom. "This is not a working document, but a political remark," says Mr. Phillip ter Woort, head of the Mongolian office for the European Bank for Reconstruction and Development (EBRD). "PPPs are not easy instruments. People think it's to transfer burden, but it's not a free ride. It takes 18-24 months to finalize just one." Read more… None of the proposed PPPs yet have sponsors, and the infrastructure issue is fast becoming a serious bottleneck. The government promises that Tavan Tolgoi's extraction will begin this year, but with no rail line to ship the loads, people are beginning to wonder: are these promises, along with the 10% stock "gift", another of the state's dodgy pledges? There was open and blunt criticism from audience members who expected more from their government, and they received direct replies assuring them that Mongolia was on the right track. "The private sector wants to show how well it can work without corruption. We have an open, democratic system and that's why it will work," the President said. Despite the bold plans, there are still some major concerns in Mongolia. With such a young judicial system and hazy implementation methods, citizens and investors are calling for the government to deliver on reforms so that this investment boom does not end up wrecking the economy. "Good governance is just a catchphrase in Mongolia," complained Mr. S. Demberel, CEO of the Mongolian National Chamber of Commerce and Industry, at the "Mongolian Economic Forum". "There is a need for speed. We have become too comfortable with the revenues from mining and are caught in this 'mining mania'. We must go deeper into the economic issues." Over the three days of panels and Q&A sessions, the problems that Mongolia faces in this next step became evident. The Mongolian Stock Exchange (MSE) is inefficient, infrastructure is dire, corporate governance is under par and political attitudes are outdated. Threats of "Dutch Disease" and high inflation are on the horizon. Last year, the ruling party promised over USD1,000 cash to each citizen, widely condemned as a vote "bribe". This year, President Ts. Elbegdorj stood at the podium to apologize, saying: "We know now that promising cash is the wrong mechanism. We will never ever promise cash again." Source: Business News Europe

LOTS OF INTEREST IN HELPING MONGOLIANS FIND WHAT THEY HAVE GOT Mr. Edward Rochette, a hard-bitten American lawyer and a veteran of mineral exploration in 56 countries, pulls up a stool in the Square Grill Pub in central Ulaanbaatar and contemplates Mongolia's 21st century gold rush. The plush bar, with its fancy chairs and finger food, does not feel like an outpost of adventurers seeking their fortunes, but as it fills, the voices ordering the drinks are of Australian mining executives, British financiers and overseas-trained Mongolian consultants. They are here seeking coal, copper and gold – and lots of it. "This is the place to be," declares Mr. Rochette as he extols the nation's virtues. "This is a frontier town." Mr. Rochette's view of a land of opportunities is one at odds with those of many in this country,

where about half the population lives in gers and makes their living from herding animals. Delicately poised between China and Russia, the buffer state is the size of Western Europe – but with just 3 million people, it is one of the least populated places on Earth. However, Mongolia's fabulous reserves of gold and copper mean that it is on the brink of transformation, potentially making its people extremely rich. The International Monetary Fund expects the Mongolian economy to grow by 9.8 per cent this year – faster than China's. Mr. Rochette, who has his fingers in many pies in Ulaanbaatar and is married into one of Mongolia's premier horse breeding families, warms to his theme. "The only possible negatives are that the Government could screw it up, or commodity prices could crater," he says. "But the Government is good, and commodity prices are great." For 16 years, Mr. Brochette worked with Mr. Robert Friedland, a controversial and charismatic mining financier who is one of the main figures responsible for discovering Mongolia's true natural resources potential. Mr. Friedland has few friends among environmentalists, but his uncanny ability to find rich veins of minerals is legendary and you will not hear a word said against him in The Square. Read more… One of the deals Mr. Brochette worked on for Friedland was the 2002 agreement for the Anglo-Australian miner BHP Billiton to sell its rights in the Oyu Tolgoi copper-gold mine to Ivanhoe for £3 million. Oyu Tolgoi, or Turquoise Hill, is the world's largest mining exploration project – it is bigger than Florida. When development of the mine is finished in a year or two, its output will account for more than 30 percent of Mongolia's economy. Oyu Tolgoi‘s neighbor in the Gobi Desert, Tavan Tolgoi, is the world's second largest coal deposit. Coal production doubled to 25 million tons last year to become Mongolia's top export, and the Government is trying to speed up the mine's development. Mr. Robert Wrixon, the managing director of Haranga Resources, says: "Mongolia is awakening. The industry is about to take off. We are just starting out to help the Mongolians find what they've got." But the influx of foreign interest has bred resentment. There have been occasional attacks on mixed couples, usually foreign men with Mongolian women, and there are right-wing groups that oppose the arrival of so many foreigners. Much of this is focused on the Chinese, who ran Mongolia as a province until 1921 and a visceral dislike for whom lingers. However, China is set to be the prime customer for Mongolia's resources and is already its largest trading partner. "The resources have to go to China, despite historical antipathies," says Mr. Wrixon. "Mongolia is happy to sell China its commodities, but is less comfortable about China having majority stakes in resource projects." Since 1990, Mongolia has had a multi-party parliamentary democracy and – despite some violence after elections in 2008 – has largely been stable. Its Government is keen to transform the boom into meaningful jobs but there is a problem finding enough qualified locals to staff the mines. "The Mongolian Government is trying very hard to make things work," said Mr. Rochette. The signs of the new wealth are emerging everywhere. "We are pleased that we can become wealthy," says a foreign-educated young man named Bold, speaking in one of Ulaanbaatar's many bars. "We are very proud of our history but there is nothing much for the young people to do these days, so taking part in this is a great opportunity."

Source: The Independent

RISING FOOD PRICES THREAT TO ECONOMIC GROWTH, ADB WARNS Sharp rises in food prices are a threat to economic growth in Asia and could push millions of people into extreme poverty, the Asian Development Bank says in a report released on Tuesday. Food prices in Asia have increased an average of about 10 percent so far this year, which the bank calculates could force 64 million people below the poverty income threshold of USD1.25 per person a day if prices remain at current levels. ―Whenever we say that Asia‘s growth rate is booming and Asia is a new global growth center, people misunderstand the point,‖ said Mr. Changyong Rhee, the chief economist of the bank, which is supported by governments and helps finance infrastructure projects around the region, among other activities. ―Asia is home to two-thirds of the world‘s poor. There is still a long way to go.‖ Asia is a major contributor to global inflation and is vulnerable to its effects. Growth in China and India is blamed for pushing up prices of many commodities. The region‘s population density and uneven income distribution make people there especially susceptible to spikes in food prices, Mr. Rhee said. The poor in Asia typically spend about two-thirds of their income on food. A continued rise in prices for food and fuel could leave Asia‘s consumers with less disposable income to spend on electronics, clothing and other products. Inflation could also spur central banks

to further raise interest rates. Taken together, this could slow down economic growth by as much as 1.5 percentage points this year, the development bank has calculated. Mr. Rhee expects a moderation in food prices later this year, but he fears it could lull governments into inaction. ―It‘s time for us to talk about long-term investments in food to make sure this problem does not recur,‖ he said.

Source: The New York Times

FRESH FUNDS FOR CHINA‟S SOVEREIGN WEALTH FUND China Investment Corp, the Chinese sovereign wealth fund, will soon receive USD100 billion-USD200 billion in new funds from the Government. CIC, which has already fully allocated the USD110 billion it had available for offshore investments, is to get the new money as Beijing seeks to reduce its exposure to US Government debt. ―There has been bureaucratic bickering for a year,‖ said one person familiar with the matter. ―It has been difficult to resolve.‖ Recently, a number of senior officials, including China‘s central bank governor, have said the country‘s foreign exchange reserves are excessive and beyond ―reasonable requirements‖. The reserves, already the largest in the world, grew by nearly USD200 billion in the first quarter to top USD3,000 billion for the first time. In the past week, two senior government economists have publicly said China only needs reserves of around USD1,000 billion. CIC was established in 2007 with the mandate to invest some of the country‘s foreign reserves in riskier offshore assets. At that time, China had less than USD1,500 billion in its foreign exchange coffers. While the fund suffered some early missteps – investing in US private equity firm Blackstone and in Morgan Stanley before their shares plummeted in the global financial crisis – people who deal with the fund say CIC has grown in professionalism and confidence. In addition to handing more money to CIC, Beijing is also considering using the reserves to set up a variety of new special-purpose funds that would invest in sectors such as energy and precious metals, as well as a foreign-exchange stabilization fund, according to a Chinese media report. Read more… Debate has raged among policymakers in Beijing for more than a year over how much more money CIC should receive, while the central bank and the ministry of finance have fought a bureaucratic turf war over whether the central bank should have more control over the fund. After its initial investments in western financial institutions, CIC has increasingly focused on offshore investments that take advantage of China‘s economic boom. Besides focusing on natural resources and energy, it is also increasingly interested in investing in Chinese companies listed offshore. However, much of what CIC does is hard to track because it often uses private equity firms to act on its behalf. In general, state-owned Chinese companies in particular are rapidly expanding their investments abroad with direct encouragement from Beijing. China‘s non-financial outbound foreign direct investment totaled USD48 billion in 2009, 48 times the amount in 2002, according to UN figures. From focusing almost exclusively on securing offshore supplies of natural resources Chinese companies are now interested in a wide range of industries, especially ones where they can acquire technology.

Source: The Financial Times

INFLATION IN CHINA POSES BIG THREAT TO GLOBAL TRADE As the United States and Europe struggle to get their economies rolling again, China is having the opposite problem: figuring out how to keep its revved-up growth engine from generating runaway inflation. Because China is now the world‘s second largest economy, after the United States, and because the country has been a leading source of global growth during the last two years, money problems there can reverberate from Wal-Mart to Wall Street and the world beyond. High inflation endangers China‘s status as the low-cost workshop for the world. And if the government‘s efforts to fight inflation cause the economy to stumble, that will cloud the outlook for international businesses — whether multinationals like General Electric or copper miners in Chile — that have been counting on China for growth. Inside China, inflation also poses a threat to social stability, a particular worry for Beijing, especially since authoritarian governments in North Africa and the Middle East have become the focus of popular uprisings. The loose monetary policy, and big investments in local government projects, did revive economic growth. But even at the time there were already concerns about soaring property prices, undisciplined bank lending and the huge debts being amassed by local governments. The fear among some experts is that the bubble will eventually burst, leading to a wave of nonperforming loans at the big state-owned Chinese banks, which have been the main financiers of the nation‘s

phenomenal growth dating to the economic reforms in the 1980s. Some economists have begun to argue that high inflation may be around for some time. Here again, the tug of war is evident. Read more… ―China is moving into a new era, a new norm,‖ said an investment analyst in Hong Kong. ―In the previous decade, inflation was about 1.8 percent a year; in the next decade, it may be closer to 5 percent.‖ The implications of such a shift are huge, not just for domestic consumers but perhaps even more so for exports. As wages and production costs rise, coastal factories are demanding higher prices for the goods they ship overseas. That means Americans, Europeans and other buyers will have to pay more for those goods or seek lower-cost suppliers elsewhere. In some cases, retailers are bidding for goods at prices the exporters consider too low. ―I hear that many Chinese exporters are rejecting orders from Wal-Mart and other Western retailers,‖ the analyst said. ―I‘ve been covering the Chinese economy for a long time, and I‘ve never heard that before.‖

Source: The New York Times

SINGAPORE AIMS TO BE RENMINBI HUB Singapore has made a bid to become the first overseas hub for trading renminbi, marking a new stage in the internationalization of the Chinese currency. The Monetary Authority of Singapore has said Beijing would soon appoint a Chinese bank to clear renminbi trades in the city state – a move that would enable Singaporean banks to directly access onshore renminbi rather than having to route transactions via Hong Kong or commercial banks on the mainland. ―It‘s a huge development,‖ said a Singapore-based currency strategist for Deutsche Bank. ―Think of a clearing bank as a pipeline that flows between Singapore and mainland China. Singapore won‘t need to go through Hong Kong any more.‖ Almost 7 per cent of China‘s international trade was settled in renminbi in the first quarter of this year, up from almost zero two years ago, official data show. The only place outside mainland China that currently has a renminbi clearing bank is Hong Kong, and as renminbi has flowed out through trade, Hong Kong banks have taken in the lion‘s share of deposits and used them to fuel a growing market in renminbi-denominated financial products. Renminbi deposits in Hong Kong surged to USD62 billion in February – up more than eightfold from two years ago. Singapore‘s ambitions in the renminbi business reflect a long history of financial sector rivalry between Singapore and Hong Kong. Hong Kong has more regional headquarters of international banks, but has lost out to Singapore as a centre for commodities and currency trading. However if the renminbi became a fully convertible currency, electronic brokering would make national borders irrelevant. Then Singapore – as the world‘s fourth largest foreign exchange trading hub -- two places ahead of Hong Kong – could see its importance increase substantially.

Source: The Financial Times

POLITICS MPs TELL PEOPLE‟S ASSEMBLY LEADERS THEIR DEMANDS NOT ACCEPTABLE Representatives of Parliament appointed by the Speaker met on Wednesday with leaders of the People‘s Assembly. On one side of the table at the meeting in Government House were Mr. J.Sukhbaatar, head of the Standing Committees on State Structure, Mr. D.Zorigt, who leads the Standing Committees on the Economy, and MP Kh.Badamsuren, while on the other were MP Ts.Shinebayar, the head of Demand for Pledge Fulfillment Union, Mr. Battsogt, and one of its more vocal members, Ms. A.Uyanga. Opening the meeting, Mr. Sukhbaatar said Parliament is a legally constituted body and cannot be dissolved on demand. Similarly, there are well-defined procedures leading to the Government‘s resignation or dismissal. Mr. Shinebayar said the coalition Government was also ―not normal‖ in Mongolia and felt there is enough reason to demand its dismissal form its failure to act according to law. Ms. Uyanga said the Government ―violated the Constitution when it was established‖, so it cannot cite the Constitution when faced with demands form its dismissal. ―The people demand this, it is your business whether you accept it or not,‖ she said, adding, ―Parliament should not urge people to follow the law when it itself does not do so.‖ Earlier on Monday, representatives of Motherland-Independence-Justice, led by Mr. Shinebayar,

submitted an urgent demand note to Government and Parliament officials. Told it would take time to study the note, the MP said they would continue with their People‘s Assembly in Sukhbaatar Square until a reply was received. Later that night, Mr. Shinebayar gave a written undertaking to the police that he would be responsible for any violence that may ensue from the protest. Eight gers put up by another group of protesters were already standing in the square, and the police did not allow participants in the Assembly to put up 20 more of theirs.

Source: News.mn

PEOPLE‟S ASSEMBLY WANTS “CRIMINAL” GOVERNMENT TO GO Some 800 delegates led by the Chairman of the recently formed group whose claim to the name MPRP is still to be decided, Mr. N.Enkhbayar, last week attended a two-day Assembly of the People, organized under the banner of the National Movement Motherland – Independence - Justice. According to the organizers, the assembly marks the start of the people‘s fight against a corrupt government. The assembly later moved out of the UB Palace to Sukhbaatar Square on Sunday. There it adopted a 9-point resolution which included the following demands: - Dismissal of the ―criminal‖ MPP-DP coalition Government, which intends to amend the Constitution; - Annulment of the present Oyu Tolgoi agreement and its replacement with a new agreement ―that will meet people‘s interests‖; - Guaranteeing Mongolian National Public Television freedom from political pressure and making it a true public organization; - And end to the Constitutional Court‘s interference in the work of the State Supreme Court.

Source: English.News.mn

BAYAR TOPS PEOPLE‟S ASSEMBLY LIST OF OLIGARCHS Delegates to the two-day People‘s Assembly were asked to list the most powerful oligarchs in the country. Of those who did, 540 gave the place to former Prime Minister S.Bayar, closely followed by his successor and the incumbent Prime Minister S.Batbold, who got 534 votes. Others who found a place on the list were, in order of votes polled, Mr. S.Bayartsogt, Minister of Finance; Mr. L.Gansukh, Minister of Environment and Tourism; Mr. Ts.Nyamdorj, Minister of Justice and Internal Affairs; Mr. T.Badamjunai, Minister of Food, Agriculture and Light Industry; Mr. D.Zorigt, Minister of Mineral Resources and Energy; Mr. N.Altankhuyag, First Deputy Prime Minister; Mr. M.Enkhbold, Deputy Prime Minister; Mr. E.Bat-Uul, DP MP; Mr. G.Zandanshatar, Minister of Foreign Relations; Mr. G.Batkhuu, Deputy Speaker of Parliament; Mr. L.Bold, Minister of Defense; Mr. Ch.Saikhanbileg, DP MP; and Mr. D.Demberel, Speaker of Parliament. Mr. M. Enkhsaikhan, former Prime Minister and now leader of the New National Party which is in alliance with Mr. Enkhbayar‘s group, later told media he was ―really shocked‖ that Mr. Bat-Uul, a universally respected senior leader, was in the oligarchy list. ―I have my reservations about some others also among the top 15 names that the Assembly has listed, but I see this as the people‘s way of asserting that they want a radical change in the overall system. The July 1 events buried Western type democracy in Mongolia and began the rule of dictatorial oligarchs. Now the people are seeking a similarly radical change in a peaceful way,‖ he said.

Source: Udriin Sonin

IRONY IN ENKHBAYAR‟S CHALLENGE TO OLIGARCHY It is no coincidence that the people‘s assembly was held on the birthday of Lenin, whose successors in the last century were responsible for the killing of over 1 million innocent Mongolians. The people attending the assembly were indeed observing the birthday, with Mr. N.Enkhbayar‘s call to start ―a revolution against the Mongolian oligarchy‖ greeted with shouts of ―Let‘s bring socialism back!‖ Observers wonder if the whole show was organized to bring socialism back or to help Mr. Enkhbayar regain his lost power. The people in general, and not just those in the assembly, have not forgotten how things were during the time when Mr. Enkhbayar ruled the country, rewarding support and sycophancy with financial benefits like tax exemption. There is irony in the thought that the present opponent of Mongolian oligarchy was himself once known as ―the godfather of corruption and the patron of a new oligarchy in Mongolia‖. There is double irony in that Mr. M.Enkhsaikhan, who coined the sobriquet and put it in circulation, should now, as chairman of the National New Party, be sharing the platform with Mr. Enkhbayar.

Source: Udriin Sonin

PRESIDENT WANTS INTEREST IN MINING AND POLITICS TO BE KEPT APART President Ts.Elbegdorj thinks any private individual or state official who owns more than 5% of the total shares in a mining project, or is in any other way too deeply connected with any such project, should be kept out of politics as also civil organizations on grounds of conflict of interest. He said this at a two-day discussion on implementation of the law on mineral resources and the need for further measures that he himself had requested to seek the views of researchers, specialists, miners, and individuals on all aspects of the sector, especially on the National Security Council‘s suspension of grant of exploration and exploitation licenses on April 27, 2010. The suspension lapses on April 30, and the President wanted a discussion on amendments to the law on mineral resources before that. After the discussion, the President said all the views expressed would be incorporated in a draft law on mineral resources that he would prepare.

Source: Undesnii Shuudan

MP ASKS PRIME MINISTER TO EXPLAIN INACTION ON PARLIAMENT PROTOCOL A DP MP, Mr. L.Gantumur, has sent a note asking Prime Minister S.Batbold why the Government has not complied with a protocol on reduction of air pollution passed by Parliament on February 10. The protocol asked the Government to submit to Parliament by March 15 a list of measures it plans to take and an account of how much money they will cost so that the state budget can be amended accordingly. The Government has not done any of these, explaining to the Standing Committee on the Budget that there will be no money for implementing the measures until the Tavan Tolgoi agreement is signed. Mr. Gantumur‘s note asks the Prime Minister to detail all developments on the issue to the Standing Committee on the Economy.

Source: Unuudur

MP HOPES PARTIES WILL RECOGNIZE NEED FOR ADMINISTRATIVE REFORM A seminar on administrative reforms was organized on Tuesday by the Standing Committee on State Structure with help from the UN Development Program in Mongolia. The head of the committee, Mr. J.Sukhbaatar, reported that representatives from the President‘s Office, the Parliament Office, the Government and the Anti-Corruption Agency had taken part in the conference. He said Mongolia adopted several measures for political and budgetary reforms in the last two decades, but little attention has so far been paid to reforming the administration. The experience of other countries shows that reforms in the three areas have to come in tandem to provide best results. Asked how the seminar would help, Mr. Sukhbaatar said political parties have long neglected the issue, but the seminar would send the right message to them and administrative reform will be part of their platform in next year‘s election. People want better and more responsive administration at all levels and political parties should recognize its importance.

Source: Unuudur

EVERY HOUSEHOLD, COMPANY TO HAVE POST BOX BY 2020 The Government has decided to adopt a postal service system that will allot each household or organization its own postal address. There are 247,000 households in Ulaanbaatar, of which around 100,000 live in apartments. Only about 15,000 of them have access to postal delivery services, in the form of post boxes where their mail is put. Now the Government plan is to issue a post box to every household and company, in Ulaanbaatar and everywhere else in the country. It will take until 2020 to cover the whole country and will require purchase of a number of vehicles to transport mail items and setting up post offices in rural regions.

Source: Zuunii Medee

TV OFFICIAL REGRETS LACK OF INTELLECTUAL PROPERTY RIGHTS Mr. Ben Moyle, British director of C1 TV, has expressed surprise over the total disregard for intellectual property rights shown by Mongolian television channels. These usually show movies, either from Hollywood or from other countries, without paying for the copyright, which is a serious blow to the global economics of the sector. This is true of other programs also, and the Television Channels‘ Association condones the unethical state of affairs.

Source: Udriin Sonin

ASIA FOUNDATION TO HELP IN ENVIRONMENT PROTECTION The Asia Foundation will provide technological and financial assistance to help protect the fragile environment of Mongolia, according to a memorandum of understanding signed last week between

Country Representative Meloney C. Lindberg and Deputy Minister of Environment and Nature L. Jargalsaikhan. The Asia Foundation will help install a water quality monitoring system, and improve methods of environmental impact assessment and data analysis. People will be trained in identifying mining operations that lead to desertification of pasture land. The assistance will be both technical and financial and will be available until 2013.

Source: Xinhua

PROGRAM PLANNED TO ASSESS EFFECT OF MINING ON HEALTH The State Health Board, a Government Implementing Agency, is working with Canada‘s Simon Fraser University to adopt a program to check how mining affects the health of workers. The suggested methodology has been tried and found successful in foreign countries, and it is the first program of its kind in Mongolia. The Board has submitted details of the program to the Ministry and related organizations. Its adoption will mean that grant of a mining license will depend on the company agreeing to follow standards that pose no undue health risks.

Source: Ardiin Erkh

MPP TEAM VISITS NORTH KOREA An MPP team has been visiting North Korea. It includes Secretary General U.Khurelsukh and a member of the Managing Council, D.Sarangerel. They have met with officials of the Labor Party of North Korea who expressed their thanks for the MPP gesture of maintaining traditional relations. Source: News.mn

MONGOLIA TO HOST INTERNATIONAL PEACE FESTIVAL Mongolia is to be the site of a peace festival and conference in August that will feature officials from around the world, including from the USA, Japan, South Korea, China, Russia and Mongolia. They will discuss Mongolia's role in peace efforts in the region. The conference will be part of the Global Peace Festival 2011, with President Ts. Elbegdorj among those scheduled to attend. It has been planned to mark the centenary of Mongolia's restored independence. Mongolia has diplomatic relations with Pyongyang and the meeting is expected to propose diplomatic initiatives, such as educational and sports exchanges, to open North Korea to its neighbors. Mr. Hyun Jin-moon, founder of the Global Peace Festival Foundation, is chairman of News World Communications, Inc., which owns United Press International.

Source: UPI

MONGOLIA‟S RAIL CHOICE SEEN AS BREAKING CHINA‟S GRIP Mongolia‘s aim of quadrupling its rail network will send coal, copper and rare earths to nations such as Japan and South Korea under a plan to reduce reliance on the Chinese market and boost economic development. The nation‘s drive to lay 5,700 kilometers of track across the country and to Russia‘s Far Eastern ports stands to benefit such companies as Australia-listed Aspire Mining Ltd. and Canada‘s Prophecy Resource Corp., said Mr. Richard Harris, CEO of Hong Kong-based Quam Asset Management. Quam has raised USD20 million for a Mongolia-focused fund that is due to start investing in a few months. ―The missing link in the Mongolian gold rush now is transportation infrastructure,‖ said Mr. Roland Nash, who helps manage about USD150 million of Russian stocks. ―The key for the Mongolians is to attract investments from as many different countries as possible to lessen their dependence on China.‖ Mongolia‘s economic growth may surge to 23 percent in 2013, more than twice the forecast expansion in China, as large mining projects begin production, the International Monetary Fund says. Agriculture and mining each account for about 20 percent of gross domestic product. Aside from its main exports of coal and copper, the country also holds oil, potash, iron ore and uranium, as well as rare earths used in electronics, wind turbines and smart bombs. Mongolia has grown increasingly dependent on commerce with China‘s 1.3 billion people since the 1991 breakup of the Soviet Union: More than 75 percent of exports went to its giant neighbor in 2009, according to European Union figures. The relationship hasn‘t always been easy, and the country remains vulnerable to pressure from the rulers of the world‘s second-biggest economy. ―Using the Russia route, Mongolia will have better access to a global market rather than just dealing with China,‖ said Mr. Chris Weafer, Moscow-based strategist. ―You need that to maximize the commercial value of its goods. Otherwise China dictates prices.‖ Read more…

Mongolia this year is to start building a 400-km link from the Tavan Tolgoi coal basin and Oyu Tolgoi copper deposit, two of the world‘s biggest untapped resources, joining with an existing rail line north to Russia and south to China. An expanded rail network eventually will stretch directly from Tavan Tolgoi to China and Russia. Extended train routes to the west and the north will link with untapped silver, iron and coal deposits, according to Eurasia Capital, Mongolia‘s biggest investment bank. ―A necklace of resource deposits lies across the south of Mongolia and the idea is to connect it to rail, connect it to China, and have options with a route via Russia,‖ said its analyst D. Musaev. ―It‘s a policy that defines what Mongolia will do over the next decade.‖ To prove Russia offers a realistic outlet, trucks filled with coal from Tavan Tolgoi drove to Ulaanbaatar, where their cargo was loaded onto a maiden 30-car train that left for Russia‘s biggest Far East port, Vostochny, on October 28 last year. The ―historic event‖ shows that Mongolian coal can travel via Russia to South Korea and Japan, OAO Russian Railways CEO Vladimir Yakunin said at the launch ceremony for the train, according to a statement posted on the state-run company‘s website. For now, Mongolia trucks its output into China, which is at least three times more expensive than moving bulk commodities by rail, Mr. Musaev said. That will not be an option when output at Tavan Tolgoi and Oyu Tolgoi reaches projected capacity, he said, given the high fuel and environmental costs. Tavan Tolgoi‘s owner, state-controlled Erdenes MGL LLC, expects coal production of as much as 30 million tons a year, according to a presentation made in Moscow in November, which didn‘t give a timeframe. That is more than the record 25 million tons from all of the nation‘s coal mines in 2010. Copper production at the Oyu Tolgoi deposit will reach about 600,000 tons a year in its first decade, says Ivanhoe Mines Ltd., which is developing the site with Rio Tinto Group, the world‘s No. 2 mining company by sales, and the Mongolian government. Moving those commodities by truck will be costly. The price of coal sold by Tavan Tolgoi Co., which already mines one area of the namesake coal basin, more than doubles to USD61 per ton by the time the fuel arrives at the Chinese border, according to a presentation by the Mongolia Mineral Resources and Energy Ministry made in Moscow in November. On top of the USD28 per ton in mining costs, the company pays USD32.50 for trucking, road charges and loading, the presentation shows. Even with a rail connection, the cost of exporting via Russia versus through China would be higher given the distances involved, Mr. Musaev said. Huanhua, the nearest Chinese port to Tavan Tolgoi, lies 1,638 km away. Russia‘s Vanino port is 5,044 km and Vostochny 5,069 km from the Mongolian coal basin. The price will be worth it because the option offers an extra export route and the opportunity to develop deposits that are too distant to utilize trucks, according to Mr. Weafer. Processing Mongolian freight will also help Russia boost its own economy in the more isolated Far East areas, which suffers from labor shortages, he said. ―The future of Russia and modernizing the economy of Siberia and the Far East is closely tied with the Asia Pacific region,‖ President Dmitry Medvedev said on April 15 in Boao, China. Integration in the region ―should be comprehensive and involve all countries, without creating new dividing lines.‖ In December last year, Russia wrote off about 98 percent of Mongolia‘s $172 million debt. Russian Railways owns a stake in AO Ulaanbaatar Railways, Mongolia‘s national operator, and guaranteed a loan for it from Russian state-controlled VTB Group in October 2010 to buy locomotives. Russia plans to sell shares equal to about 12 percent of Russian Railways, which Mr. Weafer said stands to benefit most from Mongolia‘s railway plans. The company may be worth several times its share capital of more than USD53 billion, Mr. Yakunin said last year. Aspire Mining is partnering with SouthGobi Resources Ltd. for a coking-coal project, while Prophecy Resource was given a license in February for its Chandgana Tal coal deposit. Hong Kong-listed Mongolia Energy Corp. and Mongolia Mining Corp. are two others whose business would improve with rail links, according to Monet Capital, a Ulaanbaatar-based investment bank. Still, while the economy has been growing at an average 6 percent rate during the last 10 years, the expansion has fluctuated ―sharply‖ from 1 percent in 2000 to 10 percent in 2007 and minus 1.6 percent in 2009, the IMF said in a research paper this month. ―You have to really do your homework‖ to pick Mongolian equities, said Mr. Javier Garcia, lead manager at Swiss & Global Asset Management of the 70-million-euro Julius Baer Black Sea Fund, 4 percent of which is in Mongolia. ―I‘m not bearish, but I would be extremely selective.‖ The volume of cargo between Russia and Mongolia grew 10 percent to 1.15 million tons in the first nine months of last year over the same period in 2009. The volume of Russia-China rail freight, which transits Mongolia, was 2.3 million tons in 2009, according to Russian Rail. In Russia‘s Far East,

Vostochny port plans to expand its coal-handling capacity, according to the terminal‘s website. Eurasia Capital estimates Russia will need to spend USD2 billion over three years to cope with major coal and ore export volumes from Mongolia. Mongolia will need to pay about USD3 billion for the initial 1,100-km of new rail, Lotte Engineering & Construction Co., which is leading a South Korean group that is bidding for the building contract, said last month. ―Mongolia is making a geopolitical choice and gaining a stronger bargaining position‖ by striving to boost transport connections with Russia, Mr. Musaev said.

Source: Bloomberg

NEARLY 10,000 POSITIONS VACANT IN MINING The Labor and Employment Ministry has released figures showing 8,509 positions in the mining sector are currently registered as vacant and another 11,000 new jobs will be created before the end of the year. Of the current vacancies, 1,846 are in coal mining, 400 in the petroleum sector and another 6,500 in other mining-related industries. The Mongolian University of Science and Technology can produce some 5,000 trained graduates in a year, but that still leaves mining companies with a huge labor shortfall. Foreign mining companies working here have a strictly imposed upper limit on workers they can import, so there is no quick solution to the impasse in sight.

Source: gogo.mn

AUSTRALIA SEEKS WORKERS TO MEET BOOM Australia is facing a critical shortage of workers as record numbers of large natural gas and mining projects are built to service the energy and steelmaking needs of China, Japan and South Korea, its top three export markets. The government of Western Australia says the state could face a shortage of 150,000 skilled workers by 2017, while the Chamber of Minerals and Energy of Western Australia this month warned that an additional 34,000 workers were needed in the next 20 months. Australia‘s unemployment rate of 4.9 per cent, a little more than half that of many advanced nations, is regarded as close to full employment by many economists, but Ms. Julia Gillard, prime minister, recently vowed to get welfare dependants back into the workforce. The estimated 800,000 on disability support pensions as well as the youth and long term unemployed are being targeted, while the government also wants to increase the participation rate of part-time and casual workers. To help plug the skilled workers shortfall, the national government has joined up with industry to develop an Enterprise Migration Scheme to fast-track foreign workers for large resource projects during their peak construction phases. Western Australia will also lead a government and industry delegation to the UK in July to attract migrants. ―The UK has a lot of attractive, skilled and well-educated workers that speak English,‖ one mining executive said. The delegation will search for geologists and engineers through to accountants, trades people and workers from the oil and gas industries. Mr. Reg Howard-Smith, chief executive of the Chamber of Minerals and Energy of Western Australia, said lorry drivers could earn AUD150,000 a year. Source: The Financial Times

ANNOUNCEMENTS MONTPELIER GROUP‟S WEALTH MANAGEMENT EVENING, ULAANBAATAR, MAY 4 The Montpelier Group is holding a Wealth Management Evening on May 4 at The Corporate Hotel between 6 pm and 8 pm. Mr. Peter Davies, Managing Director of the Group will present ―An Introduction to Montpelier‖, outlining the Group‘s presence in Mongolia and how it can benefit expatriates living here. Mr. Matthew White. Regional Sales Manager, Friends Provident International, calls his presentation ―Saving for the Future – The Cost of Delay‖, and will cover important and fundamental areas of financial planning for expatriates. Mr. Chris Ivinson, Area Manager, Royal Skandia, will give ―A Global Account for Mobile Investors‖, explaining how investors can avoid the currency trap and plan their taxation issues. Reservations The numbers of seats for this event is limited. For reservations please email jmeaburn@montpeliergroup.com or call +66 (0)2 661 5150. There is no charge for this event. ___________________________________________

RUNGE‟S COURSE ON „MINING FOR NON-MINERS‟, ULAANBAATAR, MAY 19-20 Runge is planning a course on ‗Mining for Non-Miners‘ in Ulaanbaatar, designed for people of a non-mining background who interact with mining personnel. Runge is a world class mining consulting, software and training company with an office in Ulaanbaatar with expat and local staff. The tentative dates are May 19 and 20, with one day focusing on coal mining and the other on metal mining. The course is aimed at providing those from a non-mining background with a comprehensive understanding of the mining industry. After attending it, participants will have a greater understanding of the operational practices pivotal to the mining industry, and will be able to interpret essential terminology and feel more comfortable interacting with core mining staff. The course fee for non-members is USD2,000, but Runge is offering a massive 50% discount to BCM members who pay USD1,000. Initial response has been extremely positive. The number of participants is limited. Please send your expression of interest via return email by Monday, May 2, if you are interested in attending this course to saruul@bcmongolia.org, or telephone 332345. ___________________________________________ GLOBAL ALLIANCE PARTNERS CONFERENCE, MONGOLIA INVESTMENT CONFERENCE, ULAANBAATAR, MAY 24-26 Eurasia Capital is hosting the Global Alliance Partners Conference and the Mongolia Investment Conference on May 24-26 in Ulaanbaatar. Through these back-to-back events, Eurasia Capital seeks to draw attention of international and regional investors to Mongolia and its diverse range of investment opportunities. Mongolia has recently experienced impressive economic growth, become the best-performing stock market globally and received record levels of foreign investments. As a result of pro-business reforms pursued by the Government, this resource-rich country has emerged as an attractive investment destination for global strategic and portfolio investors. The two events are intended to increase the awareness of the international investor community about emerging opportunities in this new Asian resource powerhouse. High level government officials, representatives of local business groups, international financial institutions, CEOs of mining and non-resource companies will be among the speakers at the 2nd Annual Mongolia Investment Conference on May 25. They will - provide information on the current market environment and outlook for the Mongolian economy - offer insight into industries that are attracting growing interest - assess the risks and rewards - evaluate the comparative advantages of various business opportunities - present a clear understanding of opportunities worth investing in. To download the preliminary agenda please click here http://enews.eurasiac.com/cgi-bin19/DM/t/hIEW0CUnT0Ddg0PLK60EM. For more information and applications please contact: Ms. Zhyldyz Sadyralieva by email: zhyldyz.sadyralieva@eurasiac.com or phone: +976 9906 1673 ___________________________________________ “MM TODAY” on MNB-TV, Fridays at 21:15 BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with BCM on ―MM Today‖. This English news program is aired every Friday for 10 minutes and is scheduled for 21:15 tonight. Tune in to watch this program that reports stories from today‘s BCM NewsWire. ___________________________________________ “BSPOT” on B-TV, Monday to Friday at 21:30 BTV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every evening from Monday to Friday at 21:30, taking most of the stories from the BCM NewsWire. ___________________________________________ NEW POSTINGS ON BCM WEBSITE'S 'PRESENTATIONS' AND 'MONGOLIA REPORTS' Presentations from BCM‘s 4 monthly meetings in 2011, several from the very successful Mines and Money Hong Kong‘s ‗Mongolia Investment Summit Morning‘ on March 25, and by Voyager Resources‘ CEO in both English and Mongolian at a March 16 MICC-sponsored gathering. In addition Mongolia Reports including the U.S. Embassy Mongolia‘s Commercial Section‘s ―2011 Mongolia Investment Climate Statement‖ are among the presentations posted on BCM's website (www.bcmongolia.org) in the "Resource, Presentations" and ―Resource, Mongolia Reports‖ sections for your review. We are now posting some news stories and analyses relevant to Mongolia on the BCM website's ‗Mongolian Business News‘ as they come, instead of waiting until Friday to put them all together in

the weekly NewsWire. The NewsWire will, however, continue to be issued on Friday, and will incorporate items that are already on the home page, so that it presents a consolidated account of the week‘s events.

ECONOMIC INDICATORS

INFLATION Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]

Year 2007 *15.1% [source: NSOM]

Year 2008 *22.1% [source: NSOM]

Year 2009 *4.2% [source: NSOM]

March 31, 2011 *8.0% [source: NSOM]

*Year-over-year (y-o-y)

CENTRAL BANK POLICY LOAN RATE December 31, 2008 9.75% [source: IMF]

March 11, 2009 14.00% [source: IMF]

May 12, 2009 12.75% [source: IMF]

June 12, 2009 11.50% [source: IMF]

September 30, 2009 10.00% [source: IMF]

May 12, 2010 11.00% [source: IMF]

April 28, 2011 11.50% [source: IMF]

CURRENCY RATES - April 28, 2011 Currency Name Currency Rate US dollar USD 1,253.88

Euro EUR 1,861.20

Japanese yen JPY 15.37

British pound GBP 2,092.04

Hong Kong dollar HKD 161.39

Chinese Yuan CNY 192.86

Russian Ruble RUB 45.60

South Korean won KRW 1.17

Disclaimer: Except for reporting on BCM‘s activities, all information in the BCM NewsWire is selected from various news sources. Opinions are those of the respective news sources.